Savings premium policies allow you to safeguard your family’s future and reward your disciplined savings efforts with a financial payout at the end of the policy term. This is called the maturity benefit. It may include sum assured on death and, in some cases, bonuses, depending on the plan type. These are typically higher than the death benefits offered by pure term insurance plans. Endowment plans, money-back policies, and ULIPs are examples of such life insurance policies.
Maturity benefits can help you cover your debts or other long-term liabilities. They also act as a safety net, providing a financial cushion in case of an emergency. For example, if you pass away during the policy term, the death benefit will take care of your outstanding debts and obligations, leaving your loved ones with peace of mind.
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The amount of the maturity benefit depends on how you’ve utilised your savings and the premium payment terms. For example, if you pay the premiums in equal annual installments for the whole of your policy term, the cash value will accumulate faster than if you paid them in quarterly or semi-annual intervals. This is because the accumulated sum of your premiums will be multiplied over time by the compounding effect.
Many traditional policies had a fixed maturity date, such as 100 or 121 years of age. However, this has changed with new life insurance plans that feature earlier maturity dates. This means you’ll be able to enjoy the benefits of your savings plan sooner.
The maturity benefit can also be a higher amount than the death benefits of your life insurance policy, especially if you’ve chosen a plan that offers guaranteed additions and loyalty additions every year. These can significantly increase your corpus. Maturity benefits are also available on the market-linked funds of ULIPs, which is suitable for those with an appetite for risk. Your life insurance provider can provide an estimate of the maturity benefit for your policy based on its particular terms and circumstances. A knowledgeable advisor can assist you with selecting the right policy for your needs.
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Insurance savings plans are a powerful tool that can help you build a solid foundation for your financial success. They offer avenues for disciplined saving, investment opportunities, and tax advantages. By including them in your financial strategy, you can safeguard your financial well-being from life’s uncertainties and unexpected events.
Like traditional tax-advantaged savings tools such as IRAs and 401(k), cash value life insurance policies offer some great benefits, including tax-deferred growth, tax-free policy loans, and income-tax-free death benefits. Each type of cash value life insurance contract works somewhat differently, so it’s important to choose the right one for your needs.
The general principle of insurance savings and investment policy products is that return and risk are closely linked. While a higher expected return generally comes with greater risk, there are also some policies that provide moderate returns with less risk. These are typically considered safe investments and may be ideal for low-risk investors.
Besides the basic maturity and death benefit, insurance savings policies often come with a range of riders# that can be added to the policy. These rider additions can cover unforeseen financial emergencies such as hospitalisation, critical illness, job loss, and financial losses due to a business or property shutdown.
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These riders# not only provide a financial safety net, but can also act as an additional savings buffer that can help you meet financial goals such as education, marriage, debt repayment, or significant purchases. These are also helpful in providing an emergency funding mechanism during times of need.
